Public agency fined for bypassing equipment tender process

Iceland’s Public Procurement Complaints Committee has fined Framkvæmdasýslan – Ríkiseignir, a government agency, one million krónur for buying equipment for a nursing home without holding a required mini-competition. The agency must also pay Icepharma’s legal costs and is liable for some of the company’s bid-preparation costs, mbl.is reported.

The agency bought equipment worth 29.1 million krónur after an informal price survey, although the framework agreement required it to invite eligible suppliers to compete in a mini-tender. The committee ruled that the purchases breached public procurement law.

Icepharma had asked the agency to explain its selection criteria, but received no answer. The company submitted a bid and later received some of the business. The agency subsequently said it had bought products from nine suppliers, weighing price, service, product quality and users’ experience.

During the case, the agency acknowledged that it had used an informal price survey instead of a mini-tender and had not set out the selection criteria as required. It said the failures resulted from mistakes in its procurement process and that it had taken steps to address them. The agency also cited the urgent public interest in securing minimum equipment needed for nursing homes to operate safely and lawfully.

The committee rejected Icepharma’s requests to invalidate the purchase decisions and reopen the procurement, because binding contracts had already been made. It said the legal conditions for declaring the contracts ineffective were otherwise met: the value exceeded the threshold of almost 20.9 million krónur, and the mini-tender requirement had been breached.

However, the contracts had been fully performed, the goods delivered and no further payments were due. Because a ruling that makes a contract ineffective can apply only to unpaid sums, that remedy was not available. The committee therefore imposed a one-million-króna administrative fine, payable to the state.

The committee also found the agency liable to Icepharma for the cost of preparing bids for the parts of the purchase where the company’s offer was rejected, but did not determine the amount of any damages. It ordered the agency to pay Icepharma 1.25 million krónur in legal costs. The ruling was issued on 24 August and published on Tuesday.